Some of the banks have suggested that the way to avoid future banking scandals is to let them charge for current accounts. It’s time to shatter the myth of ‘free’ banking.
Our latest research has found that some current account holders are paying as much as £900 in bank charges.
£900 in charges? Yes, charges for going overdrawn for two days per month without permission range from £120 to £900 a year. Yorkshire/Clydesdale Bank’s Current Account Plus will charge £75 a month on this basis, or £900 per year. The cheapest unauthorised overdraft, Halifax’s Reward Current Account, charges £5 a day (£120 a year).
Even if you have an authorised overdraft, there are still high annual percentage rates to fear when you go into the red. If you use your authorised £200 overdraft with your First Trust classic account six days a month, you’d be charged £185 a year.
All of this adds up to a hell of a lot of money. And it’s not just a few people paying these fees. Our survey of current account holders found that six in ten have paid a bank charge that they thought was unfair, hidden or disproportionate.
In fact, consumers are paying over £9bn a year in fees and lost interest. Clearly, banking isn’t free, so why are banks saying we should pay more for our accounts to avoid future crises?
Change the culture and practices of banks
Consumers shouldn’t be footing the bill when the banks have let us down so badly. In fact, we think that any agreement by the banks to start imposing a monthly fee (suggested even by the FSA) would breach Competition Law. This also alludes to collusion, which would prompt us to call for strict penalties against banks that get together to fix fees.
To suggest that banks increase charges to avoid more scandals defies logic and is nothing more than a slap in the face for consumers who are being hit hard by one of the worst financial crises in recent history. It’s even more ridiculous when you consider that consumers bailed out banks in the first place.
So let’s put a lid on the myth of ‘free’ banking. Instead there needs to be a fundamental change to the culture and practices of the banks, including greater transparency about the true cost of banking. Ultimately, the current parliamentary banking inquiry needs to put you and me, the consumer, first.